Cathy M. Lyttle - VP Corporate Communications & IR John P. McConnell - Chairman and CEO Andy Rose - EVP and CFO Mark A. Russell - President and COO.

Luke Folta - Jefferies & Company John Tumazos - John Tumazos Very Independent Research Phil Gibbs - KeyBanc Capital Markets.

Good morning and welcome to the Worthington Industries' Third Quarter 2015 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer session of the call. The conference is being recorded at the request of Worthington Industries. If anyone objects, you may disconnect at this time. I would like to introduce Ms.

Cathy Lyttle, Vice President of Corporate Communications and Investor Relations. Ms. Lyttle, you may begin..

Good morning everyone. Thank you for joining us on our third quarter conference call. As a reminder certain statements made on this call are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties and could cause actual results to differ from those suggested.

Please review our news release that was issued yesterday for more detail on those factors that could cause actual results to differ materially. If you would like to listen to today's call again, a replay will be made available later on our website.

On the call today you will hear from John McConnell, Chairman and CEO; Mark Russell, President and COO; and Andy Rose, Executive Vice President and CFO. John has some opening comments. .

Thank you, Cathy and thank you all for joining us this morning. Everyone at Worthington is committed to increasing the value of our shareholders investment and to do so in a transparent manner. We look forward to clear queries to where we are and why we feel good about the future.

Let's get started with Andy Rose, our Executive Vice President and Chief Financial Officer. .

Thank you John and good morning everyone. The company delivered 4% revenue growth in the third quarter of fiscal 2015 but the rampant decline in steel prices and elevated manufacturing costs in a few of our businesses significantly impacted profits. Demand remained solid in most of our key end markets with the exception of oil and gas and agriculture.

On Tuesday we announced the closure of our unprofitable Engineered Cabs facility in Florence, South Carolina and a workforce reduction in oil and gas equipment to scale down our cost structure to better match demand.

This resulted in a pretax impairment charge of 81.6 million composed of 44.9 million of goodwill, 22.4 million of intangibles, and 14.3 million of fixed assets in Florence, and a pretax restructuring charge of 2.3 million for severance benefits in Pressure Cylinders.

Excluding these charges we earned $0.40 per share during the quarter, down $0.18 from the prior year quarter.

However, $0.08 per share or 9.2 million pretax of the decline was specifically attributable to inventory holding losses and another $0.02 per share or 2.5 million pretax was related to the mark-to-market declines on hedges where we did not have hedge accounting.

In the prior year quarter, we had inventory gains of 1.6 million or approximately $0.01 per share. SG&A expense declined 8.9 million this quarter, primarily related to lower profit sharing and bonus accruals and as a percentage of sales fell to 8.3% from 9.8%.

Excluding restructuring charges Cylinders operating income was down 600,000 year-over-year to 21.1 million. Volumes were down 13% in cylinders driven by declines in the consumer products and industrial gas. Steel processing operating income was down 13 million to 16.3 million from the prior year quarter excluding restructuring charges.

The inventory holding losses and related steel pricing impacts mentioned previously were the primary drivers. Volumes were up 4% and remained strong across most markets with the exception of agriculture.

Revenue in Engineered Cabs was down 6 million and excluding the impairment charges Cabs recorded an operating loss of 4.5 million primarily from excessive cost in our Florence manufacturing facility.

Equity income from our joint ventures during the quarter was down 2.4 million led by declines in Serviacero and ClarkDietrich offset by increases at ArtiFlex. Serviacero has been impacted by the same steel price declines we are seeing in the U.S. market although we do not include them in our FIFO calculations.

We received dividends of 19 million during the quarter. EBITDA for the quarter adjusted for non-cash charges was 72 million down from 89 million in the prior year quarter.

Our trailing 12 month EBITDA adjusted for non-cash charges is around 350 million, very close to our all-time high in 2005, a time when rapidly rising steel prices aided both our steel company and our metal framing business. Free cash flow for the quarter was 56 million after investing 26 million in capital expenditures.

We also paid dividends of 12.5 million during the quarter. Yesterday the Board declared an $0.18 per share dividend for the fourth quarter payable in June of 2015. We also repurchased approximately 2 million shares or 57 million during the quarter and average price near 28.50.

During the quarter we also spent 54 million on the acquisition of Rome Strip Steel, a manufacturer of cold-rolled steel. This acquisition adds capacity and expands our customer base in this segment.

Shortly after the quarter close, WAVE announced that it acquired the manufacturing assets of its Axiom and Serperntina product lines from its long-term supply partner Fry Reglet. This is a vertical integration move that makes a lot of strategic sense and will be accretive this year.

Debt was up by 14 million during the quarter to 700 million, interest expense was up 2.2 million over the prior year to 8.4 million due to our 250 million long-term debt issuance back in April. Although our run rate of interest is now around 8 million after repaying 100 million of notes in December.

Our balance sheet continues to have modest leverage and significant available capital. As of quarter end we have total funded debt of 700 million, cash of 42 million, and over 400 million available under our revolving credit facilities.

Despite more inlays [ph] in the quarter then we had hoped for, we continue to have confidence in our growth strategy and our team at Worthington. Our transformation continues to yield improved operational performance in many of our facilities and the addition of our new corporate transformation team will accelerate that progress.

We have completed 18 acquisitions over the past 5 years investing close to 760 million. That investment delivered a 120 million of EBITDA in 2014 and does not include any earnings from the deals completed in 2015.

Every deal we have done has not been a success from a financial standpoint but our overall track record is delivering solid returns to our shareholders and we are confident that we will continue to do so in the future. I’ll now pass it over to Mark Russell who will discuss operations. .

Thanks Andy, I’ll start with oil and gas equipment where our sales were up 60% compared to last year reflecting our most recent acquisitions in the comparison. As a number of operating rigs continues to decline precipitously, demand for all of our products are softening.

In response to this lower price environment, we recently announced significant labor force reductions at our facilities in Garden City, Kansas; Wooster and Bremen, Ohio; Skiatook, Oklahoma affecting almost 250 people or about one third of our total oil and gas equipment workforce.

In our industrial products business, sales globally were off 4.8% compared to last year amid continued general economic weakness in Europe and the continued effect of our exit of the North American High Pressure Cylinder business.

Consumer product sales decreased 10% compared to last year and our financial results continued to be affected by costs related to consolidation of operations into our Chilton, Wisconsin facility. We continue to make progress there toward the cost and productivity targets that prompted the consolidation plan.

Alternative fuel sales were up 6% as North American customers continue to adopt compressed natural gas for refuse and Class 8 trucks, and mass transit busses [ph]. Shipments in Europe were softer. Our cryogenic products volume in North America continues to grow.

Sales of existing products were up and we continue to make progress on expanding our offering during the quarter. European and Middle Eastern volume continued to be softer reflecting a reduction in our marine liquid natural gas fuel system sales and general economic weakness in the region.

Construction of our new world class cryogenic facility in Bandirma, Turkey continues on schedule for completion next fiscal year. We still believe in the long-term growth prospects of our cryogenic business in spite of the now press spreads between liquefied natural gas and gasoline and diesel in several parts of the world.

Our Steel Processing business continues to show growth with direct shipment volume up 2% compared to the same quarter last year and total volume up 8%.

Metal Service and our Institute Data for the same period shows a slight decrease in total industry shipments in the same period as many spot price customers were delaying purchases as long as possible in the falling price environment.

Our shipments to the Detroit Three were up 19%, our other automotive shipments were up 10%, and heavy truck was up 15%. Construction shipments were flat compared to last year and notably we are down slightly versus the prior quarter. Agriculture was down 31% and continues to be our weaker segment.

An 8% increase in total processing volume was driven by both our producing mill and service center customers as they respond to their own robust automotive demand. As Andy noted, a strong overall performance in steel was more than offset by FIFO inventory losses and mark-to-market impacts in the following price environment.

This will persist for as long as prices continue to fall beyond that for our average inventory turn of about two months. We continue to run a balanced price risk position for every day and pursue substantially all of our steel shipments. We fix purchase pricing at the same time as we commit to a selling price.

Otherwise we are generally pleased with the performance of our steel business units. Coated products were off slightly as weakness in construction and agriculture demand affected hot-rolled galvanizing volume at our Delta, Ohio facility.

Our Spartan cold-rolled galvanizing operation in Monroe, Michigan also saw reduced volume as our joint venture partner there AK Steel, adjusted our newly expanded footprint. Our acquisition of Rome Strip Steel was completed in January and was accretive to our operating income in the quarter.

Our integration activity is on track and early results are meeting or exceeding our expectations. The steel companies Tailor Welded Blanks joint venture with Wuhan Iron and Steel launched production in their new Canadian facility during the quarter.

And TWB research and development continues to drive the introduction of new products to cost effectively take weight out of automobiles such as curvilinear welded blanks and tailor welded coils both of which are now in full production. Frictions through welding of aluminum blanks continues to show a promise in ongoing OEM trials for TWB.

Our Serviacero joint venture in Mexico again showed year-on-year volume growth as the automotive manufacturing base in Mexico continues a strong growth curve and look set to continue for the foreseeable future.

Our new Monterey facility continues to be the focus of Serviacero's growth with strong increases there in both Pickling and downstream processing. Our flagship JV with Armstrong WAVE finished essentially even with last year as improved profitability in Europe and Asia were outweighed by lower volume in the Americas.

With the exception of the impact of falling steel prices as Andy noted, our other joint ventures performed well and as expected in the quarter. In our Engineered Cabs business sales in the building and construction market were up 3% and forestry which is a relatively small segment was up 37%.

But that was more than offset by continued softness in mining and announced 65% decline in agricultural cab sales combined with high manufacturing cost in Florence which is our South Carolina facility which we are closing.

After three consecutive years of weakness in most major cab markets with few exceptions, our customers continue to forecast flat or declining volumes for the balance of this calendar year. And as we announced, we are consolidating our cab manufacturing footprint and we will be permanently closing our facility in Florence, South Carolina.

Production there will wind down over the next couple of quarters and will ultimately affect just over 300 employees. We are grateful for the continuing hard work and commitment shown by the people in Florence. We intend to move significant portions of the Florence manufacturing volume to our Greeneville, Tennessee facility.

Overall, we are focused on decisively adjusting to market conditions as required and also want a change in strategic direction as warranted. As Andy noted we are growing rapidly in recent years both through organic investment and by numerous acquisitions, and as Andy noted most of these businesses are contributing significantly to our earnings today.

Where they don’t, we are taking decisive steps to correct. With new business in our portfolio we will take action when it becomes apparent that we have miscalculated a risk or that a fundamental market position has changed.

Meanwhile, we recently rebooted our corporate transformation team with a renewed focus on driving transformational change even more rapidly and effectively than before. Our first transformation engagement in the quarter met our elevated expectations. We look forward to giving you updates on our progress in future quarters. John, back to you. .

Mark, Andy, thank you. At this moment we’ll be happy to take any questions that you might have. .

[Operator Instructions]. Our first question today comes from the line of Luke Folta from Jefferies. Please go ahead. .

Good morning guys. .

Good morning. .

A number of questions here, I guess firstly on the oil and gas business. It seems like things are in pretty well shaped there doing the quarter but clearly there is a lot of downward pressure.

I guess when we think about top line performance over the next several quarters, any reason to suspect that sales in that business wouldn’t mere what’s happening in overall oil and gas CAPEX, is that how we should be thinking about it?.

I think that’s right. .

Okay and then from a margin perspective, it’s encouraging that you’re being pretty aggressive in terms of adjusting your cost structure ahead of that decline.

When you think about what sort of drag this might have on Cylinders margins over the course as this decline, do you think the cuts that you are making are enough to neutralize the impact on the segment as a whole or is there something we think will be a drag?.

Yes it’s a little tough to predict but I would say probably expect a modest drag but a lot of it, I mean this is a scalable business and one of the things that I think most of you are aware of is when we acquired these companies in most cases we were adding people to take advantage of increased demand.

So in some ways we are scaling back down and probably a little bit further than when we had acquired some of these businesses. So we are going to see some margin compression, we have already seen some of it's, some of it is already reflected in the numbers.

I wouldn’t expect it to be dramatic but again oil prices, lot of it depends on where the demand picture is. .

Great okay, and then on the steel side of the business I actually missed what you said about the magnitude of inventory holding impact?.

What the number was?.

Yes..

It was 9.2 million during the quarter. .

9.2, and then heading into the May quarter, you got some lags built into your contracts.

Should that impact be higher or lower in the May quarter versus February’s as you see things now?.

Well, I mean one of the things that we’ve continued to see is the price of steel has continued to decline past the quarter end. So we are certainly going to steel that in the fourth quarter. A lot of it depends on how far steel goes down. .

Luke, I would say the same thing it depends where pricing goes from here. If it turned around today and went back up, I am not sure where the math would shake out but if it continues to fall obviously it increases the impact. .

Great, but as things are falling I would imagine that the initial went back to the biggest and then sort of the slope of the declines have sort of haven’t been as steep recently as they had early on.

So I am thinking all things equal, price is just sort of hang out where they are here for a while, does that inventory holding should fall in the May quarter?.

Well I mean, the way we kind of think about it because we are on FIFO accounting is if we had 65 days of inventory that’s sort of the amount of time it takes to work through the system. It’s not -- that is not an exact picture of how it works but that’s basically how we think about it at a high level. .

And I also think you are right and that the pace is as important as the decline and the pace is slowing. So that is a positive thing. .

Okay, right and then it sounds like you are going to be able to in a Cabs business move some of that production from Florence to some of the other facilities.

So maybe you won’t lose all the revenue from the plant but can you give us anything to help us understand maybe what the run rate of losses were in that facility, just so we can understand what the positive impacts of closing the plant would be?.

I think it is -- if the losses in Florence went away then Cabs would have earned money. .

Oh, okay, fair way to think of it. .

Yeah, close. I mean, in the quarter we were approaching $2 million of operating loss. .

Ex-South Carolina?.

No, I am just saying that was the contribution of that plant. .

I see, I see, in which the math would almost work out the same way.

Okay, and then just lastly the SG&A performance in steel was pretty good this quarter, is that the run rate we should be thinking about going forward?.

I mean, that is one of the sort of trade-offs of being a variable cost structure or a profit sharing company. And so, when our profits declined you see that impact across all of our incentive structures. .

Okay, alright, that's it. Thank you. .

And we do have a question from the line of John Tumazos from John Tumazos Very Independent Research. Please go ahead. .

Thank you very much for taking my call. And congratulations on having a Steel Processing profit of around half of normal. That's pretty good when prices fall a couple of hundred bucks every 10 months.

First, concerning WAVE, should we think of the accretive acquisition as benefiting Worthington by 100,000 a month or about 1 million a month, could you give us an idea of magnitude first?.

I wish it were in the millions John but it is probably in the 100,000. .

Second question, the dollar inventory account has risen during the fiscal year, the total inventories are 478 versus 410 at May 31. And May 31 was almost exactly the top of hot-rolled spot prices 675 to 685. So the dollar inventories are up 15%, the metal might be up 30% or something.

And the payables went up 53 million, could you give us some color as to which product lines had the increase in inventory whether you deliver with steel because it was so cheap or whether customers wouldn’t take steel from you and this might be too much inference from a balance sheet that looks like some mills might have asked you to do them a favor and take steel and said don’t even pay us for a while given that your inventory went up and your payables went up so much? I don’t have room for anymore.

.

John, there are two effects there physically. One is we had slightly higher work in process inventory in the Strip group simply because we were at capacity and still are. The Rome acquisition will relieve that now.

But we were at capacity and we had to move more metal around than we would normally and so our whoops [ph] were a little bit higher than they were previously. That should come back down.

The other thing is we weren’t speculating on inventory but we did have higher inventory than normal because we were able to get that at a lower price versus our sales commitments. Again, it wasn’t a speculation. We had sales commitments for that inventory and we took capacity out physically.

And then there were a few times when we were space constrained on that. So, those are the two effects. .

Your suppliers say do us a favor, take some steel for 300 to 400 a ton, take six months to pay us, we have so much we can't deal with it, do them a favor?.

Well, we are actively trading steel and while keeping a balanced position and we would be certainly open to those kinds of offers and we typically are. .

Thank you very much for your efforts. .

Thank you sir..

And we do have a question from the line of Phil Gibbs with KeyBanc. Please go ahead. .

Thanks, good morning.

I just wanted to clarify on the Cabs piece, did you say in the third quarter the ex-South Carolina that you would have been operating at a slight loss and I think John mentioned something close to breakeven and just on the second point with Cabs, with the relocation are you going to be sharing cost along with top line with this relocation or is it just merely a cost piece?.

The answer to your first question is, yes. I mean if you eliminate the Florence operation you got a modest operating loss for the quarter.

The second part of your question is with the smaller footprint obviously ultimately we will scale back some cost but we’ve also -- part of that is bringing the business back in the line to where it would be normally. We’ve put a lot of talented people into this business to try and work this issue.

We have a transformation team in there, we have a lot of or some of Worthington’s best people in this business and kind of fight the good fight. And as we sort of scale down the business a little bit with the closing of Florence, some of those folks will be absorbed back into other businesses in Worthington. So I would expect some reduction there. .

I would agree with that Phil that the two plant footprint should be -- have a lower fixed cost base and ultimately should have a lower variable cost base, those two plants are more efficient than Florence has been. .

That’s helpful.

I was more or less curious if by shutting down that facility that you would be turning down or losing revenues or that’s not the case either?.

We will have a slight reduction in revenues. So it will be slightly lower sales. But the sales we are not -- volume are not moving has not been profitable so... .

Okay, did you say that, Mark did you say that Ag Cab sales are down 65%, your comments did I hear that right or…?.

68% Cab sales. .

Okay and then….

I am sorry it is 65, so you are right. .

Okay and then with the plant closure announcement, is this the first of many or did you really take hard diagnostic look over a number of quarters and say that this is sort of the final decision we are making at this point in time or are we anticipating more happy listing..

With the volume down in the market as low as it has been in recent history, its far back as we can look actually. We think this is the right size for the bottom of the market so it doesn’t need to be smaller to match demand. So we are focused on getting the business more efficient in the smaller footprint.. .

For both Cabs and oil and gas?.

In all cases I think you have to look at businesses as ongoing process. You know Mark referred to that in his comments, they were always evaluating our business, whether they are on track or not on track. .

With the markets going around so it’s always in -- it’s a fluid situation. It always is and so we will continue to look at it. We don’t see anything certainly on the immediate horizon beyond what we have done but we’ll see where the economy goes and what else is happening so. Our goal is to keep going and that’s what we hope to do. .

It’s a good goal, it’s a great goal.

Are the lower steel prices benefitting some of your other businesses? They all are mostly surcharges in those businesses like cylinders and the energy business?.

In some cases it does give us a margin expansion. In most cases we are not trying to make money on the metal. So we are trying to make money on the value add and we often have deals that pass it through but some of them it does expand the margin. .

Most of cylinders for instance is fixed price on both sides and everybody is comfortable with those situations. .

I appreciate all the color, just one more quick one on Cylinders, quarter-on-quarter what was the adjusted increase in profitability driven by given the fact that volumes were down so much that the adjustment and in SG&A, in the accruals or was there some mix or some other things from a timing standpoint. .

Are you referring to Cylinders in particular Phil?.

Yes, cylinders quarter-on-quarter?.

Yeah it was up a little bit I mean. There is couple of things in play there but acquisitions is probably the big driver there. .

Okay, thank you, appreciate it. .

Thank you. .

And we do have a follow up question from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Q - John Tumazos I apologize, I probably should understand this better but when WAVE makes the acquisition did they make it with their own cash balances on hand so that the dividends from WAVE, the next couple of quarters might be a little bit less or do they borrow and if they borrow that’s not consolidated on your balance sheet even though its 50% outright.

Just explain the way financing and outflows through to Worthington. .

WAVE paid for the acquisition with their own capital and you are correct that their borrowings are not consolidated. Although John, I will tell you that this team did an outstanding job with this acquisition and the amount of capital that they paid to do this is not significant for WAVE..

Thank you very much. In terms of the oil and gas tank and cylinder businesses, I am concerned that the market thinks they are bigger than they are or that the downside exposure is maybe several times bigger than their magnitude.

Could you talk a little bit about sensitivity or worse case the drill rig count now is down for example almost 50%, what would be kind of a worse case expectation for that business, I am just concerned the market is penalizing you four and five times over?.

I think we would agree, you know, there are other companies with exposure to oil and gas and seeing a similar impact, right. That was a trade that a lot of investors made where they bought in when the prices were high and the market was growing very quickly and when oil prices fell they exited even faster arguably.

The one thing I would say on that front which is something we were talking about last night is if you look at oil and gas and even include Engineered Cabs, the two of those businesses are probably around 10% of Worthington’s total revenue if you account the JV revenue.

I mean we are probably $4 billion revenue company, include the JV revenue, and those are probably 400 million. So, and I would say the earnings of those businesses are certainly around the same percentage probably, maybe even little less because Cabs is losing money.

So I would agree with you that I think the market is probably overreacting but at the end of the day we can’t control the way the market prices are stopped. .

And if tolerate me one more excuse me, with the debt getting close to 700 million temporarily and the wonderful opportunity is to buyback the stock at lower prices, is it less likely in the next year to that Worthington might acquire a good size new business like the Cabs and maybe investor shouldn’t worry that there would be any -- no more bumps in the road because you’ve got wonderful chances just to buy around stock now?.

Well there are certainly that argument can be made. I think we certainly believe that our stock is a very good investment and that’s been reflected and the acceleration of our share repurchases.

And that being said I don’t think we expect to stop looking for good acquisitions and those would include companies within our core steel and cylinder business and potentially even outside the core.

If we found a great business would we consider it, absolutely, but one of the reasons we can flex up in our share repurchases is because at least right now we don’t have any substantial acquisitions that were on horizon.

And we are entering into the fourth quarter which historically is a very strong cash flow quarter both the fourth and the first quarter so while we are at 700 million I expect us to de-lever over the next couple of quarters. .

Thank you very much. .

Are there any other questions..

We do have a follow up question from the line of Phil Gibbs from KeyBanc. Please go ahead. .

Hey Andy, I think that last answer brings me into something on capital allocation that I wanted to ask.

You talked about some deleveraging opportunities the next couple of quarters, what right now is the rank priority for capital allocation right now for you guys the next 12 to 24 months, you made a lot of acquisitions, I know that’s part of the strategy, you got the buybacks, you got the potential de-lever what’s the hierarchy here and then on the acquisition side are there more businesses that you would be more amenable to I guess investing in from this point? Thanks.

.

I mean we don’t, I wouldn’t say we force rank our capital allocation. We sort of subscribe to a philosophy or at least I do of everything in moderation. We are going to fund our CAPEX investment.

A lot of that right now is going towards capacity expansion and businesses where at or near capacity and so there is good opportunities to generate good solid returns there. The dividend, we kind of have been paying a similar dividend this year.

We evaluate that every quarter and we’ll do that again in June particularly as part of our strategic planning. But that’s $12 million to $12.5 million a quarter. It’s not a huge investment at least at this point. Share repurchase and M&A are kind of the governor.

If we have M&A, we will obviously fund those opportunities to the extent we think they are good investments and that’s why I said before there is an opportunity to de-lever because if there is not a sizeable acquisition that we are going to fund in the next quarter then obviously we are going to either use that capital to buy back stock which we been doing or pay down debt.

And so those are kind of the two options. Now we may decide to buyback more stock, I don’t know but I would say all things being equal if we stayed at the same pace in terms of share repurchases our CAPEX kind of going to stay at a similar level to what it has been and our dividend is going to set at least for the next quarter.

So that’s why I say it is possible that we do de-lever. .

Okay, any help you could give us on the recent WAVE acquisition and what that means, I know you talked about it as backward integration any thoughts is there anymore that you could give us?.

Well, the only thing I would say on that is WAVE is a manufacturing business and this Axiom and Serpentina product lines are growing very quickly and it made sense for WAVE to own the manufacturing of those products and they’ve been working to buy the assets or buy the business, the whole business for several years and they were able to strike a deal to do that.

And so they will now control the manufacturer of those products which is what they need to do. It’s not a huge investment of capital for WAVE because they basically bought assets and they will obviously transfer some of the good people that work there over to the WAVE payroll and it will be accretive.

I mean WAVE is a profitable manufacturing operation, it’s not going to move the needle in a huge way but it is millions of dollars in terms of incremental profit from the acquisition, without a lot of capital outlay. .

Is it an efficiency investment or is it a top line investment?.

Well, probably neither. I mean, I think its controlling your own destiny, right. WAVE wants to grow this product line and Armstrong wants to grow this product line and they want to control the manufacture of it, they don’t want to be at the mercy of a supplier and have the risks associated with that.

So they wanted to control the manufacturing assets and it is a margin opportunity, right. So the margin that they were paying to Fry Reglet they will now keep for themselves. .

And the return on the capital?.

The return on the capital is what it obviously made it attractive. .

Okay, so it is an efficiency opportunity potentially. Okay, thanks. .

You are welcome. .

And at this time there are no further questions in queue, please continue. .

Thank you very much. We appreciate you all joining us today. Our company is in great shape. We have a strong leadership team which is rapidly growing in return and I remain very confident and excited about our future. Thank you again. Talk to you next quarter. .

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